SHREWSBURY, N.J. -- The planned merger of WesCorp with VolCorpincluded a capital payout plan whereby WesCorp would returnVolCorp's member capital over a 20-year period.


Back in March NCUA's Office of Corporate Credit Unions advisedcorporates that the OCCU would be "reluctant to recommend" approvalto the NCUA Board of merger applications that contain a payout ofretained earnings in any form. "The recent trend in several mergernegotiations, to include a payout of the merging corporate creditunion's retained earnings, does not promote the objective ofincreasing retained earnings in the corporate system," NCUAwrote.


WesCorp and VolCorp have found a way to meet the OCCU's wishes,said Todd Lane, WesCorp's executive vice president and chieffinancial officer. WesCorp is effectively changing the payout awayfrom a capital instrument to an expense item. WesCorp will payVolCorp members a dividend each quarter based on a notional amountover the same 20-year period. The notional amount will be based onthe surplus above VolCorp's 2.25% reserves and undivided earningsat the time of merger. Based on VolCorp's current RUDE, the surplusshould be about $5 to $6 million, with WesCorp paying outapproximately $26 million over 20 years.


WesCorp expects the merger to close by the end of June.

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